AUD – Australian Dollar
The Aussie remained under pressure throughout trading on Friday, falling to a new 2021 low of 0.7105 early in the session. Nevertheless, the Aussie took advantage of a small rebound in the close to hold onto the weekend at 0.7138. Despite the small rally, the Aussie opened this morning at 0.7132, down 0.23% from Friday’s opening price.
It has been a week to forget for the Aussie with an almost perfect storm of events conspiring to undermine demand for the commodity-linked currency. Indeed, it was a combination of “bad news for the Aussie and safe haven for the USD” that saw the AUD / USD drop to its lowest level since November 2020. On the Australian side of the pair COVID-19 continued to be the headlines acting nationally, with two-thirds of Australians now finding themselves in some form of lockdown. Treasurer Frydenberg expressed this effect on the economy by revealing that the Treasury Department expects a 2% contraction this quarter. Investors are also speculating that “normal” activity will not pick up immediately after the September quarter, which could therefore see Australia enter another “technical” recession. A weakening in commodity prices added to the downward pressure, with iron ore in particular falling 24.91% for the month. The sharp declines were felt across a number of commodities including oil and copper and ultimately undermined demand for the Aussie.
Entering a new week, the Australian has little on the economic calendar to digest with attentions to stay on the national COVID-19 situation as well as the larger narrative of global growth.
The US dollar index rose 1.02% this week to open this morning at 93.46. Helped by the weakening of risk sentiment and the subsequent flight to safe-haven stocks, the US dollar rallied impressively last week to reach a nine-and-a-half-month high on Friday before retreating slightly before the weekend. end.
The larger global narrative of a simple post-pandemic economic recovery took off last week as China’s industrial production and retail sales both registered slower growth rates than in July. With global growth strongly correlated to the Chinese economy, the weaker results sounded alarm bells in markets which, in turn, saw commodity prices drop. The surprise results also led to a shift in risk sentiment and an increase in the greenback’s supply, as investors sought the US dollar as a safe haven. The strength of the US dollar was a clue that the Federal Reserve may consider reducing its monetary stimulus later this year. The July policy meeting minutes, released last week, showed that “most” officials were in favor of starting to gradually cut monthly asset purchases later this year.
With few notes on today’s macroeconomic record for the greenback, attention remains on the larger risk-free narrative ahead of the GDP figures on Thursday.
CAD / CAD: 0.9084 – 0.9194
EUR / EUR: 0.6049 – 0.6122
GBP / AUD: 1.8962 – 1.9191
AUD / NZD: 1.037 – 1.0494
CAD / USD: 0.7083 – 0.7168